GET A PRE-APPROVAL
A pre-approval is not an absolute guarantee that the lender issuing the pre- approval will approve your finance application.
Any pre-approval is still subject to conditions such as mortgage insurance approval, valuation and the lender being satisfied that the property being offered as security is considered “suitable security”. A pre-approval gives you the comfort of knowing that a lender has made an assessment on how much you can borrow based on the information you have provided to them and have satisfied basic lending criteria.
You should see any pre-approval as a “comfort letter” from the lender. If you are looking for more certainty from an approval you will need to have selected the property you intend to purchase. This is most often the case where you intend to purchase at an auction. In this case you will apply for an “unconditional/formal approval” from the lender prior to making an offer or bidding at an auction. With a formal approval you will have satisfied a lender that you have met all their lending criteria including valuation and they are satisfied with the property being offered as security. You should still check to make sure there are no other lender conditions that apply.
Any offer to purchase a property that is based on a pre-approval should always still be subject to finance. The last thing any buyer who has signed an unconditional offer to purchase wants is to find out at the last minute that their application for finance is rejected on a “technicality”.
Pre-approvals are often used as sales tools – very simply, if you have a pre-approval from Lender A and you find a property to purchase, there is a greater chance of you applying for a formal approval with that lender when you finally settle on a property. It is a very effective way for lenders and brokers to take their clients off the market. Don’t fall into the trap of not looking at all your options when the time comes to buy a property – there may be better more suitable products available when you finally go to contract.
The main benefit of a pre-approval is the “peace of mind” it provides, and along with that comes comfort when negotiating with a seller or agent. Negotiating from a position of strength and knowing where you stand can sometimes help you negotiate a better price with a seller.
If you would like to discuss your options in this regard or find out information on this topic please don’t hesitate to contact us.
KEITH MARSHALL | DIRECTOR
AUSTRALIAN MORTGAGE AND FINANCIAL ADVISERS
The information provided in this page is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. You should seek independent advice from your financial adviser before making any decisions.
AUSTRALIAN MORTGAGE AND FINANCIAL ADVISERS (AMAFA)
Phone: 07 3378 2056
Fax: 07 3378 2069